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Declining labor force attachment and downward trends in unemployment and participation

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Abstract

The US labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock- flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through unemployment, while other nonparticipants enter the labor force mostly through employment.

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  • Régis Barnichon & Andrew Figura, 2013. "Declining labor force attachment and downward trends in unemployment and participation," Economics Working Papers 1397, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1397
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The role of marginal non-participants in the labor force
      by Economic Logician in Economic Logic on 2013-11-28 21:20:00

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    1. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    2. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Ayşegül Şahin, 2017. "Gross Worker Flows over the Business Cycle," American Economic Review, American Economic Association, vol. 107(11), pages 3447-3476, November.
    3. Barnichon, Regis & Garda, Paula, 2016. "Forecasting unemployment across countries: The ins and outs," European Economic Review, Elsevier, vol. 84(C), pages 165-183.
    4. Mai Dao & Davide Furceri & Mr. Prakash Loungani, 2014. "Regional Labor Market Adjustments in the United States," IMF Working Papers 2014/211, International Monetary Fund.
    5. Alan B. Krueger & Judd Cramer & David Cho, 2014. "Are the Long-Term Unemployed on the Margins of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 229-299.
    6. Feridoon Koohi-Kamali & Aida Farmand & Jose Pedro Bastos Neves, 2021. "The Duration of U.S. Joblessness and the Great Recession," SCEPA working paper series. 2021-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.

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    More about this item

    Keywords

    marginal participant; want a job; stock-flow decomposition.;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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